Bse Limited vs Acil Cotton Industries Limited

[Arising out of order dated 31.12.2020 in C.P. (IB) No. 348/NCLT/AHM/2019 passed by the Adjudicating Authority (National Company Law Tribunal), Ahmedabad Bench, Ahmedabad, Court 2.]

IN THE MATTER OF:

BSE LIMITED, Having its Registered office at 25th Floor, P.J. Towers, Dalal Street Fort, Mumbai-400001 Through its Assistant Manager. .... Appellant. (Operational Creditor)

Versus

ACIL COTTON INDUSTRIES LIMITED, (Formerly Known as Adeshwar Cotton Industries Limited) Having its registered office at B-1, Sadguru Complex, Near Rupal Park, Gotri Road, Baroda, Gujarat-390021 ....... Respondent. (Corporate Debtor)

Present: For Appellant: Ms. Surekha Raman, Advocate. For Respondent: None.

JUDGMENT

(17th December, 2021)

Justice Anant Bijay Singh;

This Appeal has been preferred by the Appellant (Operational Creditor)

through its Assistant Manager aggrieved and dissatisfied by the order dated 2

31.12.2020 passed by the Ld. Adjudicating Authority (National Company Law

Tribunal), Ahmedabad Bench, Ahmedabad, Court 2 in C.P. (IB) No.

348/NCLT/AHM/2019 whereby and where under the Application filed by the

Appellant herein (Operational Creditor) under Section 9 of the Insolvency and

Bankruptcy Code, 2016 (for short IBC) was dismissed.

2. The facts giving rise in the instant Appeal are as under:

i) The Appellant (Operational Creditor) is a Company incorporated under

the provisions of the Companies Act, 1956 and is a recognized stock exchange

duly recognised by the Central Government/Securities and Exchange Board

of India ("SEBI") under the provisions of the Securities Contracts (Regulations)

Act, 1956 ("SCRA"). The appellant is constituted for the purpose of assisting

the business of buying, selling or dealing in securities of the companies which

have been granted listing permission by the Appellant.

ii) The Appellant as well as the companies listed on the Appellant and the

constituents/investors dealing in the said listed companies through member

brokers are governed by Securities Contracts (Regulation) Rules, 1957, SERI

(Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR

Regulations"), the Rules, Bye-laws and Regulations, 1957 of the Appellant

("Exchange") (as amended from time to time) and circulars/notices issued by

SEBI/the Exchange from time to time.

iii) Further case is that as per Section 21 of the SCRA and as per the

requirements of the Appellant, a Listing Agreement was executed between the

Appellant and the Respondent (who was earlier known as "Adeshwar Cotton

Industries Ltd.") on 27.06.1995. The Respondent holds Registration No:

Company Appeal (AT) (Insolvency) No. 133 of 2021 3

022000 and its Corporate Identification Number as:

L99999GJ1994PLC022000. The Respondent subsequently changed its name

to 'ACIL Cotton Industries'. The Appellant vide its notice bearing no.

20091001-25 dated 01.10.2019 notified that the Respondent had advised the

Appellant about change in its name from Adeshwar Cotton Industries Limited

to ACIL Industries Limited w.e.f. 06.10.2009.

iv) Further case is that pursuant to the execution of Listing Agreement that

permitted listing and trading of Respondent's securities on the Appellant's

trading platform, the securities of the Respondent were listed on the trading

platform provided by the Appellant on or about 02.08.1995.

v) As per the Listing Agreement, more particularly Clause 38 of the said

Agreement, in clear and unequivocal terms casts an obligation upon the

Respondent to pay the requisite Annual Listing fees ("ALF") on or before the

30th day of April, every year.

vi) Further case is that pursuant to the intention to avail the service of

listing of its securities on the trading platform of the Appellant, the

Respondent, on 27.06.1995 entered into the Listing Agreement and thus was

bound to pay the ALF to the Appellant. By failing to make timely payments of

the ALF, the Respondent has committed breach of contract and listing

requirements while its securities continue to be listed on the platform of the

Appellant.

vii) The claim of the Appellant in the present case is with regard to the

operational debt in the form of outstanding ALF owed by the Respondent to

Company Appeal (AT) (Insolvency) No. 133 of 2021 4

the Appellant. The Securities of the Respondent are listed on the trading

platform of the Appellant and the Respondent is liable to pay such an amount

of the service of listing of its securities on the Appellant/Exchange.

viii) Further case is that the Respondent made payments of the ALF till

Financial Year 2013-2014, last of which was paid on 28.06.2013 when the

Respondent paid an amount of Rs. 67,416/- as ALF. Thereafter, the

Respondent, even while being listed on the Appellant's trading platform, failed

to make any further payments towards the obligatory ALF.

ix) Further case is that the Appellant raised several invoices periodically

calling upon the Respondent to pay to the Appellant in compliance with the

clauses of the Listing Agreement and listing requirements of the ALF with

arrears and such invoices that were duly served upon the Respondent. The

Respondent despite receiving such invoices, wilfully neglected to remit the

pending ALF and arrears thereof to the Appellant whilst continuing to avail

the listing services on the trading platform of the Appellant.

x) Further case is that the continuing and recurring defaults committed

by the Respondent in payment of the operation debt of Rs. 11,33,922/- [Rs.

10,37,470/- (amounting to principal due and payable as on 23.04.2018) +

96,452/- (computed as interest payable as on March, 2019)], the Appellant

issued a Demand Notice dated 15.03.2019 to Respondent under Rule 5 of the

IBC, 2016 calling upon the Respondent to make good the said operational

debt and in the event of existence of dispute with respect to the amount of the

unpaid operational debt, required the Respondent within 10 days of receipt

thereof, to intimate the Appellant regarding pendency of any proceedings in

Company Appeal (AT) (Insolvency) No. 133 of 2021 5

relation to such dispute filed before the receipt of the Demand Notice failing

which Corporate Insolvency Resolution Process would be initiated.

xi) The aforesaid Demand Notice dated 15.03.2019 was dispatched vide

speed post service and addressed to the registered address of the Respondent

and also sent through email as available on the website of the MCA for

payment of Rs. 11,33,922/-. However, the Appellant, due to the fact that the

Respondent failed to satisfy and submit to the Appellant, the debt that was

duly payable and continuing, instituted a Petition under Section 9 of the Code

read with Rule 6 of the Insolvency and Bankruptcy (Application to

Adjudicating Authority) Rules, 2016 being C.P.(IB) No. 348/NCLT/AHM/2019

before the Adjudicating Authority and after hearing, the Ld. Adjudicating

Authority dismissed the same. Hence this Appeal.

Submissions on behalf of the Appellant

3. The Learned Counsel for the Appellant during the course of arguments

and his memo of Appeal along with Written Submissions and while assailing

the impugned order have formulated the question of law as hereunder:

"Whether the right to apply under Section 9 should be subject

to limitation when it is apparent that the Respondent's

continuous default is not merely restricted to the initial date of

default but on every subsequent occasion when the Respondent

was obliged to make payments but failed to pat ALF?"

4. The Learned Counsel for the Appellant submitted that the Ld.

Adjudicating Authority failed to appreciate that the default was not a 'one off'

Company Appeal (AT) (Insolvency) No. 133 of 2021 6

occurrence that happened three years prior to the date of filing of the

application, or on 01.04.2015 alone in such case the application would be

barred under Article 137 of the Limitation Act but the default was in respect

of ALF payable under separate invoices raised for each of the years post 2015

together with arrears of the previous years and interest accrued thereupon

and which fact was rightly mentioned in Form 3 (at page 81 of the Appeal

Paper Book) as also in Form 5 Part IV (at page 105 of the Appeal Paper Book)

under date of default as 01.04.2015 till as of date.

5. It is further submitted that the Ld. Adjudicating Authority failed to

appreciate that failure to pay ALF by itself constitutes a continuous cause of

action and is intrinsically linked to the services enabled and provided by

Appellant and continuously availed by Respondent till 2018 despite such

defaults.

6. It is further submitted that the Ld. Adjudicating Authority failed to

appreciate that the Respondent has acknowledged the debt payable to the

Appellant since the Respondent continued to avail the listing service on

continuous basis which stands undisputed before the Adjudicating Authority.

7. It is further submitted that the Ld. Adjudicating Authority has wrongly

cast doubts on the correctness of the information contained in Form-5 as also

on the documents filed therewith.

8. It is further submitted that the Ld. Adjudicating Authority has while

observing that date of default in Form-5, Part IV in clause 2 is not reflected

making the Form-5 incomplete, proceeded to calculate due date as per the

Company Appeal (AT) (Insolvency) No. 133 of 2021 7

said Form to be 01.04.2015, thereby ignoring the categorical mention of the

same under date of default as 01.04.2015 till as of date in the Form 3 as also

in Part IV of the Petition. However, the Ld. Adjudicating Authority has further

cast doubts on the Listing Agreement entered into between the Appellant

and Respondent on account of change of name of the Respondent from

Adeshwar Cotton Industries Ltd. to ACIL Cotton Industries Limited in the year

2009 and held it not to be a valid agreement without appreciating the fact that

Adeshwar Cotton Industries Ltd. and ACIL Cotton Industries Limited were

undoubtedly the same entity and Respondent continued to make payments

Towards ALF under the new name and the CIN remained unchanged as

L99999GJ1994PLC022000.

9. It is further submitted that the Appellant relied on an order of this

Appellate Tribunal in Company Appeal (AT) (Insolvency) No. 472 of 2018

'B.S.E. Ltd. Vs. Neo Corp International Ltd. dated 05.04.2019' wherein

paragraphs 2 to 6 are read as hereunder:

"2. Learned counsel for the Appellant relied on Form-5, the

application under Section 9 of the I&B Code wherein

particulars of operational debt of Rs.5,57,959/- have been

shown due since 1st April, 2014 till the date of filing.

3. From the record we find that invoices were also issued on

1st April, 2017, which shows the total amount payable

including service tax for the year 2017- 18, Swachh Bharat

Cess and Krishi Kalyan Cess, totalling Rs.5,57,959/-. It

appears that the Adjudicating Authority failed to consider

Company Appeal (AT) (Insolvency) No. 133 of 2021 8

the aforesaid documents attached with Form-5 and came to

a wrong conclusion that the application under Section 9 is

barred by limitation.

4. It is true that Limitation Act, 1963 is applicable in terms

of Section 238A of the I&B Code. For the purpose of filing

application under Section 9, Part II of the Schedule of

Limitation Act, 1963 will apply, which reads as under:-

PART II - OTHER APPLICATIONS

Description of Period of Time from which application Limitation period begins to run

137. Any other Three years When the right to application for which apply accrues.

o period of limitation is provided elsewhere in this division.

5. As in the present case, the right to apply accrues on 1st

April, 2017, we hold that the application under Section 9

was not barred by limitation.

6. Part I of the Schedule relates to filing of suits, money

suits, etc. If the claim is barred by limitation then a person

can take plea that "there is no debt payable in law". In the

present case, as we find that the invoice raised on 1st April,

2017 is more than Rupees One Lakh and a suit if filed will

not be barred by limitation, the Corporate Debtor cannot

take plea that the amount is barred by limitation."

Company Appeal (AT) (Insolvency) No. 133 of 2021 9

10. It is further submitted that the Ld. Adjudicating Authority in the present

matter passed the impugned order which is not accordance with law, so, based

on these submissions the impugned order is fit to be set aside and the Appeal

be allowed.

11. Despite valid service of notice the Respondent failed to appear before

this Appellate Tribunal nor filed any reply, as such, paper publication was also

effected. Since the service is complete, the matter has been heard in absence

of the Respondent (Corporate Debtor) and judgment was reserved.

12. After hearing the Learned Counsel for the Appellant and going through

the pleadings of the case and from the perusal of the impugned order, the

Respondent (Corporate Debtor) also not appeared before the Ld. Adjudicating

Authority.

13. The Ld. Adjudicating Authority has taken note of the fact that the

Demand Notice issued under Section 8 of the IBC on 15.03.2019 which was

sent through Registered post on 19.03.2019. However, the same was returned

with a postal remark "addressee moved". The Appellant has also issued

Demand Notice through email on the same date demanding the arrears of the

Annual Listing Fee. However, no dispute is raised by the Respondent.

14. Further, impugned order it transpires that admittedly, the Appellant

received the last payment on 28.06.2013 amounting to Rs. 67,416/- for the

Financial Year 2013-2014. However, the Appellant in Form -5 has stated that

debt fell due on 01.04.2015. Further, the Ld. Adjudicating Authority has also

perused page 12, at para-2.10 of the petition wherein the Respondent has

Company Appeal (AT) (Insolvency) No. 133 of 2021 10

made payment of Annual Listing Fee to the Applicant/Appellant till Financial

Year 2013-2014 only and the last payment was received on 28.06.2013 for an

amount of Rs. 67,416/-. Thereafter, the Respondent (Corporate Debtor) did

not pay any amount in respect of Annual Listing Fee.

15. The Ld. Adjudicating Authority have giving finding that debt failed due

on 01.04.2015 as admitted by the Petitioner, hence the Application filed under

Section 9 of the IBC barred by limitation.

16. The Ld. Adjudicating Authority also takes note of the fact at para 13 of

the impugned order the agreement between the parties, it is found that some

of the pages/places are found blank and no remarks is given to that effect.

However, the agreement contains the initial of the parties only in the last page

and none of the pages of agreement contains the signature of the parties and

it also found that the agreement entered between "Adeshwar Cotton Industries

Ltd." with The Stock Exchange of Bombay. However, there is no seal and

signature for and on behalf of The Stock Exchange of Bombay. Admittedly, the

name of Adeshwar Cotton Industries Ltd. changed to ACIL Cotton Industries

Ltd., but to that effect no agreement has been entered by the petitioner with

that of ACIL Cotton Industries Ltd. As such, there is no agreement between

the Appellant and present Respondent.

17. We are of the considered view that the Ld. Adjudicating Authority has

rightly come to the conclusion that the agreement so filed cannot be relied

upon, as the same is not a valid agreement in the eye of law, so Learned

Counsel for the Appellant relied on an order passed by this Appellate Tribunal

Company Appeal (AT) (Insolvency) No. 133 of 2021 11

in 'B.S.E. Ltd. Vs. Neo Corp International Ltd. dated 05.04.2019' (supra)

is not applicable in this matter.

18. Moreover, Listing Fees comes under the ambit of 'Regulatory dues'

which SEBI is entitled to recover. The Respondent being an entitly registered

under SEBI, is under an obligation to follow the Regulations prescribed by

SEBI for recovery of its dues. The dues so said are not 'Operational Dues' but

'Regulatory Dues'. The Insolvency Law Committee suggests that Regulatory

Dues are not to be recovered under 'Operational Debt'.

19. We have carefully examined the pleadings of the case and came to the

conclusion that no interference is required in the impugned order. Hence, the

impugned order dated 31.12.2020 passed by the Ld. Adjudicating Authority

(National Company Law Tribunal), Ahmedabad Bench, Ahmedabad, Court 2

in C.P. (IB) No. 348/NCLT/AHM/2019 is hereby affirmed. The Appeal is

dismissed. No order as to costs.

20. Registry to upload the Judgment on the website of this Appellate

Tribunal and send the copy of this Judgment to the Ld. Adjudicating Authority

(National Company Law Tribunal), Ahmedabad Bench, Ahmedabad, Court 2

forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical) New Delhi 17th December, 2021 R. Nath.

Company Appeal (AT) (Insolvency) No. 133 of 2021